The Uncleared Margin Rules require margin to be exchanged between counterparties dependent on their Aggregate Average Notional Amount (AANA) – basically the amount of trading they conduct.
The main algorithm used to calculate the UMR margin requirement is SIMM. This takes as its inputs a set of provided parameters and the sensitivities of trades to specific risk factors. These sensitivities are provided in a standard format called CRIF.
A regulatory threshold of $50 million allows counterparties to only exchange margin when they breach this level. The main difference between UMR and the Initial Margin calculated by CCP‘s is that margin is a two way exchange for UMR, whereas cleared margin is only paid to the CCP.
Find out the cost effective way to comply with UMR